(a not-for-profit corporation) Financial Report with Supplemental Information June 30, 2012
Certificate of Officers We certify that we have examined the attached financial statements and supplemental information of, Mill Creek Senior Housing Corporation d/b/a The Village of Mill Creek, and to the best of our knowledge and belief, the same is a true statement of the financial condition as of June 30, 2012. Rod Auton President September 11, 2012 Date Dick Rabbideau Vice President September 11, 2012 Date ID# 20-4633288 Employer Identification Number
Management Agent's Certification We certify that we have examined the attached financial statements and supplemental information of, Mill Creek Senior Housing Corporation d/b/a The Village of Mill Creek, and to the best of our knowledge and belief, the same is a true statement of the financial condition as of June 30, 2012. Cheryl Carney Management Agent Representative September 11, 2012 Date (248) 281-2020 Telephone Number ID# 38-1387145 Management Company Employer Identification Number Kesha Akridge Property Manager
Contents Report Letter 1 Financial Statements Balance Sheet 2-3 Statement of Activities 4-5 Statement of Changes in Deficiency in Net Assets 6 Statement of Cash Flows 7-8 Notes to Financial Statements 9-12 Supplemental Information 13 Report Letter 14 Balance Sheet Data 15-16 Statement of Activities Data 17-19 Statement of Changes in Deficiency in Net Assets Data 20 Statement of Cash Flows Data 21-22 Supplemental Information 23-24 Schedule of Changes in Fixed Asset Accounts 25 Schedule of Expenditures of Federal Awards 26 Computation of Surplus Cash 27 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 28-30 Report on Compliance with Requirements That Could Have a Direct and Material Effect on the Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 31-33 Schedule of Findings and Questioned Costs 34-36 Corrective Action Plan 37-38
To the Board of Trustees Mill Creek Senior Housing Corporation Independent Auditor's Report We have audited the accompanying balance sheet of, Mill Creek Senior Housing Corporation (the "Organization"), as of June 30, 2012 and 2011 and the related statements of activities, changes in deficiency in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of, Mill Creek Senior Housing Corporation d/b/a The Village of Mill Creek, as of June 30, 2012 and 2011 and its changes in deficiency in net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated September 11, 2012 on our consideration of Mill Creek Senior Housing Corporation 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audits. September 11, 2012 By: Robert F. Long Engagement Partner 27400 Northwestern Highway P.O. Box 307 Southfield, MI 48037-0307 Federal ID Number: 38-1357951 Phone Number: (248) 352-2500 1
Balance Sheet Assets June 30, 2012 June 30, 2011 Current Assets Cash - Operations $ 1,370 $ 2,421 Tenant accounts receivable 2,768 - Prepaid expenses 2,341 2,333 Total current assets 6,479 4,754 Deposits - Held in Trust Tenant deposits held in trust 15,290 18,973 Deposits - Funded Escrow deposits 13,025 11,912 Replacement reserve 69,929 55,368 Total deposits - Funded 82,954 67,280 Fixed Assets Land and land improvements 335,400 335,400 Buildings and building improvements 3,530,311 3,526,477 Building equipment (portable) 30,043 30,043 Office furniture and equipment 107,215 107,215 Miscellaneous fixed assets 8,081 - Total fixed assets 4,011,050 3,999,135 Accumulated depreciation (363,645) (257,456) Net fixed assets 3,647,405 3,741,679 Total assets $ 3,752,128 $ 3,832,686 See Notes to Financial Statements. 2
Balance Sheet (Continued) Liabilities and Deficiency in Net Assets June 30, 2012 June 30, 2011 Current Liabilities Accounts payable - Operations (Note 3) $ 20,587 $ 56,866 Accounts payable - Entity (Note 3) 10,000 10,000 Accounts payable - Section 8 and other 370 8,545 Accrued wages payable 2,270 1,901 Accrued payroll taxes payable 178 170 Accrued interest payable - Other loans and notes (surplus cash) (Note 3) 9,880 6,760 Prepaid revenue - 233 Total current liabilities 43,285 84,475 Tenant deposits held in trust (contra) 13,668 13,169 Long-term Liabilities Capital advance (Note 2) 3,751,000 3,751,000 Notes payable - Surplus cash (Note 3) 59,462 59,462 Total long-term liabilities 3,810,462 3,810,462 Total liabilities 3,867,415 3,908,106 Deficiency in Net Assets Deficiency in unrestricted net assets (115,287) (75,420) Total deficiency in net assets (115,287) (75,420) Total liabilities and deficiency in net assets $ 3,752,128 $ 3,832,686 See Notes to Financial Statements. 3
Statement of Activities Year Ended June 30, 2012 June 30, 2011 Rent Revenue Rent revenue - Gross potential $ 139,107 $ 146,122 Tenant assistance payments 149,673 116,258 Total rent revenue (potential at 100% occupancy) 288,780 262,380 Vacancies Apartments (2,766) (47,943) Total vacancies (2,766) (47,943) Net rent revenue (rent revenue less vacancies) 286,014 214,437 Financial Revenue Investments - Replacement reserve 88 104 Investments - Miscellaneous 152 17 Total financial revenue 240 121 Other Revenue Laundry and vending revenue 2,242 1,969 Gifts (Note 3) 10,787 5,775 Miscellaneous revenue 821 249 Total other revenue 13,850 7,993 Total revenue 300,104 222,551 Administrative Expenses Conventions and meetings 231 1,512 Management consultants 4,690 - Advertising and marketing 931 3,407 Other renting expenses 368 1,176 Office expenses 2,729 953 Management fee (Note 3) 21,060 17,666 Manager or superintendent salaries 36,056 30,783 Auditing expenses 6,400 7,400 Bookkeeping fees/accounting services (Note 3) 6,480 6,480 Bad debts - 6,399 Miscellaneous administrative expenses 9,031 5,713 Total administrative expenses 87,976 81,489 See Notes to Financial Statements. 4
Statement of Activities (Continued) Year Ended June 30, 2012 June 30, 2011 Utilities Expense Electricity $ 13,727 $ 15,688 Water 19,204 7,789 Gas 7,481 14,341 Total utilities expense 40,412 37,818 Operating and Maintenance Expenses Payroll 16,198 23,240 Supplies 3,785 5,334 Contracts 18,388 13,092 Garbage and trash removal 1,460 1,531 Heating/Cooling repairs and maintenance 1,799 15 Snow removal 4,390 4,997 Miscellaneous operating and maintenance expenses 28,032 21,026 Total operating and maintenance expenses 74,052 69,235 Taxes and Insurance Payroll taxes (FICA) 4,220 3,976 Property and liability insurance (hazard) 10,769 9,125 Workers' compensation 1,254 1,074 Health insurance and other employee benefits (Note 4) 11,966 11,065 Total taxes and insurance 28,209 25,240 Financial Expenses Interest on notes payable (long term) (Note 3) 3,120 6,760 Miscellaneous financial expenses 13 29 Total financial expenses 3,133 6,789 Total Costs of Operations Before Depreciation 233,782 220,571 Change in Net Assets Before Depreciation 66,322 1,980 Depreciation Expense 106,189 104,992 Change in Total Net Assets from Operations $ (39,867) $ (103,012) See Notes to Financial Statements. 5
Statement of Changes in Deficiency in Net Assets Net Assets - July 1, 2010 $ 27,592 Increase in deficiency in net assets (103,012) Deficiency in Net Assets - June 30, 2011 (75,420) Increase in deficiency in net assets (39,867) Deficiency in Net Assets - June 30, 2012 $ (115,287) See Notes to Financial Statements. 6
Statement of Cash Flows Year Ended June 30, 2012 June 30, 2011 Cash Flows from Operating Activities Receipts: Rental $ 274,838 $ 228,589 Interest 240 121 Gifts 10,787 5,775 Other cash receipts 3,063 2,218 Total receipts 288,928 236,703 Disbursements: Administrative (41,314) (34,571) Management fee (22,815) (15,911) Utilities (40,412) (37,818) Salaries and wages (60,426) (49,724) Operating and maintenance (73,375) (45,995) Property insurance (10,769) (9,125) Miscellaneous taxes and insurance (17,448) (15,950) Tenant security deposits 4,182 (4,449) Miscellaneous financial (13) (29) Total disbursements (262,390) (213,572) Net cash provided by operating activities 26,538 23,131 Cash Flows from Investing Activities Net deposit to the escrow accounts (1,113) - Net deposit to the reserve for replacement account (14,561) (18,090) Net purchase of fixed assets (11,915) (3,951) Net cash used in investing activities (27,589) (22,041) Net (Decrease) Increase in Cash (1,051) 1,090 Cash - Beginning of year 2,421 1,331 Cash - End of year $ 1,370 $ 2,421 See Notes to Financial Statements. 7
Statement of Cash Flows (Continued) A reconciliation of change in deficiency in net assets to net cash from operating activities is as follows: Year Ended June 30, 2012 June 30, 2011 Change in deficiency in net assets $ (39,867) $ (103,012) Adjustments to reconcile change in deficiency in net assets to net cash from operating activities: Depreciation 106,189 104,992 (Increase) decrease in assets: Tenant accounts receivable (2,768) 28 Accounts receivable - HUD - 5,346 Prepaid expenses (8) 165 Cash restricted for tenant security deposits 3,683 (5,401) (Decrease) increase in liabilities: Accounts payable - Operations (36,279) 4,285 Accrued liabilities 377 238 Accrued interest payable 3,120 6,760 Tenant security deposits held in trust 499 952 Prepaid revenue (8,408) 8,778 Net cash provided by operating activities $ 26,538 $ 23,131 See Notes to Financial Statements. 8
Notes to Financial Statements June 30, 2012 and 2011 Note 1 - Nature of Business and Significant Accounting Policies Mill Creek Senior Housing Corporation (the Organization ) is a not-for-profit corporation that owns and operates a 45-unit affordable housing rental project for elderly persons (the "Project"). The Project, located in Battle Creek, Michigan, is operating under HUD Section 202 under the National Housing Act and is regulated by the U.S. Department of Housing and Urban Development (HUD) with respect to rental charges and operating methods. The Organization is sponsored by Presbyterian Villages of Michigan (PVM). PVM is a comprehensive, diverse, and faith-based organization serving seniors in multiple settings since 1945. Its mission, guided by its Christian heritage, is to serve seniors of all faiths and to create new possibilities for quality living. PVM's tradition of social accountability and servant leadership is further reflected in its statement of beliefs and values and its various operational philosophies and practices. Significant accounting policies are as follows: Basis of Accounting - The Organization maintains its accounting records and prepares its financial statements on an accrual basis, which is in accordance with accounting principles generally accepted in the United States of America. The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Organization and is presented on the same basis of accounting as the financial statements. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Deposits Held in Trust - In accordance with the Regulatory Agreement with HUD, the Organization is required to maintain a tenant security deposit trust account. The amount must at all times be equal to or exceed the aggregate of all outstanding obligations to tenants for refundable security deposits. The tenant security deposits fund consists of cash. Deposits - Funded - The funds controlled by the Organization represent escrows and restricted funds for a replacement reserve and other reserves. The capital escrow was established with a capital investment of $10,000 as required by the Regulatory Agreement and pursuant to HUD regulations and is recorded in escrow deposits. The replacement reserve consists of deposits by the Organization to offset specific expenses and to replace structural elements and mechanical equipment upon the consent of HUD. Future monthly commitments for the funding of the replacement reserve account total $1,500. 9
Notes to Financial Statements June 30, 2012 and 2011 Note 1 - Nature of Business and Significant Accounting Policies (Continued) Fixed Assets - Land, buildings, furniture, and equipment are recorded at cost when purchased or appraised value if donated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which range from 5 years to 40 years. Maintenance, repairs, and renewals that do not involve any substantial betterments are charged to expense when incurred. Expenditures that increase the useful life of the property are capitalized. Impairment of Assets - The Organization recognizes impairment of long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows (net realizable value) estimated to be generated by those assets are less than the assets' carrying amount. No impairment of the Organization's rental property has occurred. Tenant Accounts Receivable Allowance for Bad Debts - Accounts receivable represents amounts due from tenants. Tenant accounts receivable generally are collectible as long as the tenant is occupying the unit. When the tenant vacates the unit, any unpaid balance remaining after application of the security deposit is charged to bad debt expense. There was no allowance for bad debts at June 30, 2012 and 2011. Classification of Net Assets - Net assets of the Organization are classified as permanently restricted, temporarily restricted, or unrestricted depending on the presence and characteristics of donor-imposed restrictions limiting the Organization's ability to use or dispose of contributed assets or the economic benefits embodied in those assets. All net assets of the Organization at June 30, 2012 and 2011 are considered unrestricted. Federal Income Taxes - No provision for income taxes has been included in the financial statements since the Organization is exempt from such taxes under Section 501(c)(3) of the Internal Revenue Code. Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability if the Organization has taken an uncertain tax position that more likely than not would not be sustained upon examination by the IRS or other applicable taxing authorities. Management has analyzed the tax positions taken by the Organization and has concluded that as of June 30, 2012 and 2011, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Management believes it is no longer subject to income tax examinations for fiscal years prior to 2009. 10
Notes to Financial Statements June 30, 2012 and 2011 Note 1 - Nature of Business and Significant Accounting Policies (Continued) Rental Income - Units that are designated for occupancy by eligible low-income tenants under a HUD Section 202 Project Rental Assistance Contract (PRAC) require tenants to contribute a portion of the contract rent based on formulas prescribed by the U.S. Department of Housing and Urban Development. PRAC payments are received for the balance of contract rent from HUD. The current contract expires August 24, 2012. Management is in the process of renewing the contract and intends to have a renewal in place prior to the expiration date. Regulatory Agreement - A Regulatory Agreement with HUD was signed in connection with the mortgage note. No violations of this agreement were noted for the year ended June 30, 2012. A violation of this agreement was noted for the year ended June 30, 2011 and has been included in the schedule of findings and questioned costs. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events - The financial statements and related disclosures include evaluation of events up through and including September 11, 2012, which is the date the financial statements were issued. Note 2 - Capital Advance The Organization obtained a capital advance from HUD which was used to assist in financing the construction of the Project in accordance with the provisions of HUD Section 202 of the Housing Act of 1959. The capital advance at June 30, 2012 and 2011 is $3,751,000, bears no interest, and is not required to be repaid as long as the housing remains available to very low-income households and the aged and/or handicapped for a period of 40 years, ending in May 2047. In addition, the Organization is subject to the additional requirements of the HUD Section 202 program. If default occurs, then HUD, at its option, may accelerate the entire principal balance and charge interest. It is the Organization's intent to comply with the program requirements. Based on the time and provision requirements, the advance is recorded as a long-term liability. The capital advance is collateralized by the land and building of the Organization. Note 3 - Related Party Transactions Trustee appointments are approved by Presbyterian Villages of Michigan (PVM), a related not-for-profit organization which is also the HUD-approved management agent. 11
Notes to Financial Statements June 30, 2012 and 2011 Note 3 - Related Party Transactions (Continued) As of June 30, 2012 and 2011, $20,587 and $56,866, respectively, is due to PVM for payment of expenditures and is included in accounts payable. The Organization has also entered into a residual receipts note in the amount of $59,462 at June 30, 2012 and 2011, which was approved by HUD. The note is unsecured, bears interest at 5.25 percent, and incurred interest expense and interest payable total $9,880 and $6,760 at June 30, 2012 and 2011, respectively. In addition, during 2012 and 2011, PVM Foundation provided the Organization with $10,787 and $5,775, respectively, in contribution support through the allocation of funds raised by the Organization and matching grants from PVM Foundation. The property management agreement provides that a management fee in the amount of 7.68 percent of gross rents collected be paid to PVM, limited to $39 per unit per month. The Organization paid management fees of $21,060 and $17,666 to PVM for the years ended June 30, 2012 and 2011, respectively. In addition, accounting service fees of $6,480 were incurred with PVM for the years ended June 30, 2012 and 2011. The accounts payable - entity at June 30, 2012 and 2011 is due to PVM as the Organization's sponsor for its capital investment of $10,000 as required by the Regulatory Agreement and pursuant to HUD regulations. This amount may be repaid with HUD approval from funds held in the escrow if certain conditions are met. Note 4 - Retirement Plans PVM and its affiliates maintain a tax-sheltered retirement plan qualified under Internal Revenue Code Section 403(b). Under this plan, qualified nonunion participants who contribute may receive an employer discretionary match subject to sponsor board approval. The Organization's contributions to the plan totaled $0 and $199 for the years ended June 30, 2012 and 2011, respectively. Note 5 - Current Vulnerability Due to Certain Concentrations The Organization's sole asset is The Village of Mill Creek senior housing project. The Organization s operations are concentrated in the senior housing market. In addition, the Organization operates in a heavily regulated environment. The operations of the Organization are subject to the administrative directives, rules, and regulations of federal, state, and local regulatory agencies, including, but not limited to, HUD. Such administrative directives, rules, and regulations are subject to change by an Act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including additional administrative burden, to comply with a change. 12
Supplemental Information 13
Independent Auditor's Report on Supplemental Information To the Board of Trustees Mill Creek Senior Housing Corporation We have audited the financial statements of, Mill Creek Senior Housing Corporation, as of and for the year ended June 30, 2012. Our audit was performed for the purpose of forming an opinion on the financial statements of Mill Creek Senior Housing Corporation taken as a whole. The accompanying supplemental information, including the schedule of expenditures of federal awards, is presented for the purpose of additional analysis as required by HUD and the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations, and is not a required part of the financial statements. For the purpose of electronic submission to the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC), the supplemental information is also deemed to include the financial data template information as presented in the balance sheet and the statements of activities, changes in deficiency in net assets, and cash flows. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. September 11, 2012 14
Balance Sheet Data June 30, 2012 Assets Current Assets 1120 Cash - Operations $ 1,370 1130 Tenant accounts receivable 2,768 1200 Prepaid expenses 2,341 1100T Total current assets 6,479 Deposits - Held in Trust 1191 Tenant deposits held in trust 15,290 Deposits - Funded 1310 Escrow deposits 13,025 1320 Replacement reserve 69,929 1300T Total deposits - Funded 82,954 Fixed Assets 1410 Land and land improvements 335,400 1420 Buildings and building improvements 3,530,311 1440 Building equipment (portable) 30,043 1465 Office furniture and equipment 107,215 1490 Miscellaneous fixed assets 8,081 1400T Total fixed assets 4,011,050 1495 Accumulated depreciation (363,645) 1400N Net fixed assets 3,647,405 1000T Total assets $ 3,752,128 15
Balance Sheet Data (Continued) June 30, 2012 Liabilities and Deficiency in Net Assets Current Liabilities 2110 Accounts payable - Operations $ 20,587 2113 Accounts payable - Entity 10,000 2116 Accounts payable - Section 8 and other 370 2120 Accrued wages payable 2,270 2121 Accrued payroll taxes payable 178 2133 Accrued interest payable - Other loans and notes (surplus cash) 9,880 2122T Total current liabilities 43,285 2191 Tenant deposits held in trust (contra) 13,668 Long-term Liabilities 2310 Capital advance 3,751,000 2311 Notes payable - Surplus cash 59,462 2300T Total long-term liabilities 3,810,462 2000T Total liabilities 3,867,415 Deficiency in Net Assets 3131 Deficiency in unrestricted net assets (115,287) 3130 Total deficiency in net assets (115,287) 2033T Total liabilities and deficiency in net assets $ 3,752,128 16
Statement of Activities Data Year Ended June 30, 2012 Rent Revenue 5120 Rent revenue - Gross potential $ 139,107 5121 Tenant assistance payments 149,673 5100T Total rent revenue (potential at 100% occupancy) 288,780 Vacancies 5220 Apartments (2,766) 5200T Total vacancies (2,766) 5152N Net rent revenue (rent revenue less vacancies) 286,014 Financial Revenue 5440 Investments - Replacement reserve 88 5490 Investments - Miscellaneous 152 5400T Total financial revenue 240 Other Revenue 5910 Laundry and vending revenue 2,242 5970 Gifts 10,787 5990 Miscellaneous revenue 821 5900T Total other revenue 13,850 5000T Total revenue 300,104 Administrative Expenses 6203 Conventions and meetings 231 6204 Management consultants 4,690 6210 Advertising and marketing 931 6250 Other renting expenses 368 6311 Office expenses 2,729 6320 Management fee 21,060 6330 Manager or superintendent salaries 36,056 6350 Auditing expenses 6,400 6351 Bookkeeping fees/accounting services 6,480 6390 Miscellaneous administrative expenses 9,031 6263T Total administrative expenses 87,976 Utilities Expense 6450 Electricity 13,727 6451 Water 19,204 6452 Gas 7,481 6400T Total utilities expense 40,412 17
Statement of Activities Data (Continued) Year Ended June 30, 2012 Operating and Maintenance Expenses 6510 Payroll $ 16,198 6515 Supplies 3,785 6520 Contracts 18,388 6525 Garbage and trash removal 1,460 6546 Heating/Cooling repairs and maintenance 1,799 6548 Snow removal 4,390 6590 Miscellaneous operating and maintenance expenses 28,032 6500T Total operating and maintenance expenses 74,052 Taxes and Insurance 6711 Payroll taxes (FICA) 4,220 6720 Property and liability insurance (hazard) 10,769 6722 Workers' compensation 1,254 6723 Health insurance and other employee benefits 11,966 6700T Total taxes and insurance 28,209 Financial Expenses 6830 Interest on notes payable (long term) 3,120 6890 Miscellaneous financial expenses 13 6800T Total financial expenses 3,133 6000T Total Costs of Operations Before Depreciation 233,782 5060T Change in Net Assets Before Depreciation 66,322 6600 Depreciation Expense 106,189 3250 Change in Total Net Assets from Operations $ (39,867) 18
Statement of Activities Data (Continued) Supplemental Information Year Ended June 30, 2012 S1000-010 1 Total principal required under the mortgage, even if payments under a workout agreement are less or more than those required under the mortgage $ 0 S1000-020 2 Replacement reserve deposits required by the Regulatory Agreement or amendments thereto, even if payments may be temporarily suspended or waived 18,000 S1000-030 3 Replacement reserve or residual receipt releases that are included as expense items on this profit and loss statement 0 S1000-040 4 Project improvement reserve releases under the flexible subsidy program that are included as expense items on this profit and loss statement 0 19
Statement of Changes in Deficiency in Net Assets Data Year Ended June 30, 2012 S1100-060 Deficiency in Net Assets - July 1, 2011 $ (75,420) 3250 Increase in deficiency in net assets (39,867) 3130 Deficiency in Net Assets - June 30, 2012 $ (115,287) 20
Statement of Cash Flows Data Year Ended June 30, 2012 Cash Flows from Operating Activities Receipts: S1200-010 Rental $ 274,838 S1200-020 Interest 240 S1200-025 Gifts 10,787 S1200-030 Other cash receipts 3,063 S1200-040 Total receipts 288,928 Disbursements: S1200-050 Administrative (41,314) S1200-070 Management fee (22,815) S1200-090 Utilities (40,412) S1200-100 Salaries and wages (60,426) S1200-110 Operating and maintenance (73,375) S1200-140 Property insurance (10,769) S1200-150 Miscellaneous taxes and insurance (17,448) S1200-160 Tenant security deposits 4,182 S1200-220 Miscellaneous financial (13) S1200-230 Total disbursements (262,390) S1200-240 Net cash provided by operating activities 26,538 Cash Flows from Investing Activities S1200-245 Net deposit to the mortgage escrow account (1,113) S1200-250 Net deposit to the reserve for replacement account (14,561) S1200-330 Net purchase of fixed assets (11,915) S1200-350 Net cash used in investing activities (27,589) S1200-470 Net Decrease in Cash (1,051) S1200-480 Cash - Beginning of year 2,421 S1200T Cash - End of year $ 1,370 21
Statement of Cash Flows Data (Continued) Year Ended June 30, 2012 A reconciliation of change in deficiency in net assets to net cash from operating activities is as follows: 3250 Change in deficiency in net assets $ (39,867) Adjustments to reconcile change in deficiency in net assets to net cash from operating activities: 6600 Depreciation 106,189 (Increase) decrease in assets: S1200-490 Tenant accounts receivable (2,768) S1200-520 Prepaid expenses (8) S1200-530 Cash restricted for tenant security deposits 3,683 (Decrease) increase in liabilities: S1200-540 Accounts payable - Operations (36,279) S1200-560 Accrued liabilities 377 S1200-570 Accrued interest payable 3,120 S1200-580 Tenant security deposits held in trust 499 S1200-590 Prepaid revenue (8,408) S1200-610 Net cash provided by operating activities $ 26,538 22
Supplemental Information Year Ended June 30, 2012 1. Schedule of Reserve for Replacements - In accordance with the provisions of the Regulatory Agreement, restricted cash is held by Huntington Bank to be used for replacement of property with the approval of HUD as follows: 1320P Balance - July 1, 2011 $ 55,368 1320DT Monthly deposits ($1,500 x 12) 18,000 1320INT Interest 88 1320WT Approved withdrawals (3,521) 1320OWT Other withdrawals - Bank service charges (6) 1320 Balance - June 30, 2012 $ 69,929 2. Schedule of Residual Receipts - N/A 3. Computation of Surplus Cash - Form HUD 93486 - See attached 4. Schedule of Changes in Fixed Asset Accounts - See attached 5. Schedule of 5300 Accounts - N/A 6. Schedule of 6900 Accounts - N/A 7. Nursing Home Data - N/A 8. Detail of Accounts: 6390 Dues and subscriptions $ 2,040 Bank charges 1,139 Mileage 458 Professional services 500 Miscellaneous 760 Administrative and program supplies 4,134 Total $ 9,031 23
Supplemental Information (Continued) Year Ended June 30, 2012 8. Detail of Accounts (Continued): 6590 Connectivity $ 9,687 Software purchase 1,679 Miscellaneous maintenance 5,322 System maintenance, repair, and support 9,904 Minor system purchases 1,440 Total $ 28,032 24
Schedule of Changes in Fixed Asset Accounts Year Ended June 30, 2012 Assets Balance July 1, 2011 Additions Deductions Balance June 30, 2012 Balance July 1, 2011 Accumulated Depreciation Current Provision Deductions Balance June 30, 2012 Net Book Value June 30, 2012 1410 Land and land improvements $ 335,400 $ - $ - $ 335,400 $ - $ - $ - $ - $ 335,400 1420 Buildings and building improvements 3,526,477 3,834-3,530,311 230,660 94,658-325,318 3,204,993 1440 Building equipment (portable) 30,043 - - 30,043 - - - - 30,043 1465 Office furniture and equipment 107,215 - - 107,215 26,796 10,723-37,519 69,696 1490 Miscellaneous fixed assets - 8,081-8,081-808 - 808 7,273 Total $ 3,999,135 $ 11,915 $ - $ 4,011,050 $ 257,456 $ 106,189 $ - $ 363,645 $ 3,647,405 Fixed Asset Addition Detail: Buildings and building improvements - Patio extension $ 3,834 Miscellaneous fixed assets: Treadmill 4,086 Cross trainer 3,995 Total $ 11,915 25
Schedule of Expenditures of Federal Awards Year Ended June 30, 2012 Federal Agency/Pass-through Agency/Program Title CFDA Number Federal Expenditures U.S. Department of Housing and Urban Development: Supportive Housing for the Elderly - Capital Advance 14.157 $ 3,751,000 Supportive Housing for the Elderly - Project Rental Assistance Contract 14.157 149,673 Total federal awards $ 3,900,673 26
Computation of Surplus Cash Year Ended June 30, 2012 S1300-010 Cash $ 16,660 S1300-040 Total Cash 16,660 Current Obligations S1300-075 Accounts Payable - 30 Days 20,957 S1300-100 Accrued Expenses (Not Escrowed) 2,448 2191 Tenant/Patient Deposits Held In Trust (Contra) 13,668 S1300-140 Total Current Obligations 37,073 S1300-150 Surplus Cash (Deficiency) $ (20,413) S1300-210 Deposit Due Residual Receipts $ - 27
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 28
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report To the Board of Trustees Mill Creek Senior Housing Corporation We have audited the financial statements of Mill Creek Senior Housing Corporation d/b/a The Village of Mill Creek (the "Organization") as of and for the year ended June 30, 2012 and have issued our report thereon dated September 11, 2012. We have conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Mill Creek Senior Housing Corporation 's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Organization's financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weakness, as defined above. 29
To the Board of Trustees Mill Creek Senior Housing Corporation Compliance and Other Matters As part of obtaining reasonable assurance about whether Mill Creek Senior Housing Corporation 's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the board of trustees, the audit committee, management, others within the Organization, and the U.S. Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties. September 11, 2012 30
Report on Compliance with Requirements That Could Have a Direct and Material Effect on the Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 31
Report on Compliance with Requirements That Could Have a Direct and Material Effect on the Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Independent Auditor's Report To the Board of Trustees Mill Creek Senior Housing Corporation Compliance We have audited Mill Creek Senior Housing Corporation 's (the "Organization") compliance with the types of compliance requirements described in the U.S. Office of Management and Budget Circular A-133 Compliance Supplement that could have a direct and material effect on its major federal program for the year ended June 30, 2012. Mill Creek Senior Housing Corporation 's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major federal program is the responsibility of Mill Creek Senior Housing Corporation 's management. Our responsibility is to express an opinion on Mill Creek Senior Housing Corporation 's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Mill Creek Senior Housing Corporation 's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Mill Creek Senior Housing Corporation d/b/a The Village of Mill Creek's compliance with those requirements. In our opinion, Mill Creek Senior Housing Corporation complied, in all material respects, with the requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2012. 32
To the Board of Trustees Mill Creek Senior Housing Corporation Internal Control Over Compliance In planning and performing our audit, we considered Mill Creek Senior Housing Corporation 's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the board of trustees, the audit committee, management, others within the Organization, and the U.S. Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties. September 11, 2012 33
Schedule of Findings and Questioned Costs 34
Schedule of Findings and Questioned Costs Year Ended June 30, 2012 Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weaknesses? Yes X No Noncompliance material to financial statements noted? Yes X None reported Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weaknesses? Yes X None reported Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes X No Identification of major program: CFDA Number Name of Federal Program or Cluster Opinion 14.157 U.S. Department of Housing and Urban Development - Project 044-EE043 - Support Housing for the Elderly Unqualified Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? X Yes No 35
Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2012 Section II - Financial Statement Audit Findings Reference Number Current Year: Reference Number Prior Year: None None Finding Finding Questioned Costs Questioned Costs Section III - Federal Program Audit Findings Reference Number Current Year: None Finding Questioned Costs Reference Number Prior Year: 2011-1 Status Indicator - Cleared Finding Reporting Period - June 30, 2012 Statement of Condition - The Organization failed to conduct recertifications on certain residents in accordance with HUD guidelines. Narrative - Management has replaced the position and believes the new staff person is more qualified to follow guidelines. In addition, all recertifications have now been completed and the overpayment received by the Organization in the amount of $8,545 has been repaid. Questioned Costs 36
Corrective Action Plan 37
Corrective Action Plan Year Ended June 30, 2012 A. Comments on Findings and Recommendations - N/A - No current year findings B. Actions Taken or Planned - N/A - No current year findings C. Status of Corrective Actions on Prior Findings - The finding has been cleared. Management has replaced the position and believes the new staff person is more qualified to follow guidelines. In addition, all recertifications have now been completed and the overpayment received by the Organization in the amount of $8,545 has been repaid. 38